The number of patent settlements in the pharmaceutical sector that are potentially problematic under the European Union's antitrust rules fell to 10% of total patent settlements in the sector in the period July 2008 to December 2009 compared with 22% in the period covered in last year's inquiry into the pharmaceutical sector (January 2000-June 2008). The amount of money involved in the settlements, between the so-called "originator" pharmaceutical companies and producers of generic drugs also appears to have decreased from more than € 200 million recorded in the sector inquiry period to less than € 1 million in the more recent period, shows a Commission report on the monitoring of patent settlements. This would suggest an increased awareness of the industry of which settlement agreements might attract competition law scrutiny. It is good news for consumers that cheaper generic drugs are not being unduly kept out or delayed into the market. At the same time, the overall number of patent settlements shows that the Commission's heightened scrutiny of the sector has not hindered out-of-court settlement of litigation. The Commission will continue monitoring the sector to make sure that the settlements in the sector are not delaying entry of generics in the market or do not contain other restrictions that would be problematic under EU competition law

"Patent settlements are an effective means to end patent-related disputes and litigation. Nobody disputes this. However, some of them may be anticompetitive. Our report appears to show the sector's increased awareness of the potential competition concerns, but the Commission will remain attentive to ensure that the sale of safe, affordable medicines is not delayed by unfair practices. This is all the more important in times of crisis and of serious budgetary constraints," said Joaquín Almunia, Commission Vice President in charge of Competition Policy.

The Commission today has adopted a Report on the monitoring of patent settlements in the pharmaceutical sector. The monitoring exercise was launched in January 2010 and collected data on settlement agreements between originator companies and generic ones for the period from 1 July 2008 to 31 December 2009 (see IP/10/12). The report follows the Commission's competition inquiry into the pharmaceutical sector concluded in July 2009 (see IP/09/1098and MEMO/09/321).

The survey discovered that 93 patent settlement agreements were concluded between originator and generic companies during the 18 months covered by the survey. This compares with 207 agreements concluded during the 7.5 years covered by the sector inquiry (January 2000 to June 2008).

However, the number of settlements that may be problematic from a competition perspective decreased significantly in importance and number. In the 7.5-year period covered by the sector inquiry, such settlements accounted for 45 out of 207 or 22 % of the settlements reported. By contrast, in the period July 2008 to end 2009, only 10 % or 9 out of 93 of the settlements fell into the category that might attract scrutiny. The direct value transfers involved in the settlements also decreased.

The settlements that may prove problematic are those that limit generic entry and foresee a value transfer from originator to a generic company. The value transfer can take different forms such as direct payments, but can also consist of other commercial advantages. The Commission would also frown at agreements that contain restrictions beyond the exclusionary zone of the patent, i.e. which would grant protection against generic entry outside the time, product or geographic scope of the patent.

Not all settlements falling into the potentially problematic category warrant an immediate in depth antitrust investigation by the Commission. Each case will be assessed on its merits. When considering action the size of the markets concerned, the value transferred from originator to generic companies and the restriction on independent generic entry will be considered. In cases with a purely national dimension, the Commission may also share certain information with national competition authorities. The Commission already has two open investigations with respect to patent settlements (see MEMO/09/322, Servier and IP/10/8, Lundbeck).

The monitoring exercise has also showed the sector's concern that the Commissions' heightened focus would result in an increase in court litigation was largely unfounded as the number of settlement agreements has actually increased.

The Commission will repeat the monitoring exercise, which proved to be of limited burden for the companies concerned, in 2011.

Background

The Commission asked 41 originator and 45 generic companies to submit copies of their patent settlement agreements relevant for the EU/EEA markets, in order to better understand the use of patent settlements in the EU and to help identifying those that might need further scrutiny.